United States Ex Rel. Donegan v. Anesthesia Associates of Kansas City, PC, 2016 U.S. App. LEXIS 14830

Background

Relator John Donegan (CRNA) brought a qui tam FCA suit alleging Anesthesia Associates of Kansas City (AAKC) billed Medicare at the higher "Medical Direction" rate while anesthesiologists were not present during patients' "emergence" from anesthesia.
Medical Direction reimbursement requires an anesthesiologist to complete seven steps, including personally participating in the most demanding aspects "including, if applicable, induction and emergence." 42 C.F.R. § 415.110(a)(1)(iii).
At Menorah Medical Center, CRNAs remained with patients through extubation and transfer to the PACU; anesthesiologists performed induction and visited patients either in the OR or in PACU.
Relator alleged AAKC knowingly submitted false claims because anesthesiologists were "virtually never present" during emergence (as Relator defined it to end at transfer to PACU). The United States declined to intervene.
On cross-motions for summary judgment the district court ruled the regulation was ambiguous, AAKC’s interpretation (that emergence can include PACU recovery) was objectively reasonable, and that reasonable interpretation negated the scienter needed for FCA liability; it also refused to consider a new extubation theory raised only at summary judgment and denied Relator partial SJ on 724 claims with unsigned billing copies.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Meaning of "emergence" in Step Three	"Emergence" ends when patient is turned over to PACU; anesthesiologists were not present during emergence	"Emergence" is a process that can extend into PACU; AAKC policy included recovery room	Regulation ambiguous; medical experts agree emergence can extend into PACU; AAKC interpretation objectively reasonable
Whether AAKC knowingly submitted false claims (FCA scienter)	Billing at Medical Direction rate despite noncompliance shows knowing fraud	Reasonable interpretation of ambiguous regulation negates actual knowledge/reckless disregard	Reasonable interpretation belies required scienter absent evidence government warned otherwise; summary judgment for AAKC affirmed
Reliance on prior government guidance to show recklessness	Prior report/Allina suggests agency interpreted Step Three narrowly	No contemporaneous official CMS guidance warned AAKC; decades-old report insufficient	No relevant official warning presented; failure to seek agency clarification not reckless
New extubation-based theory raised at summary judgment	Extubation is a "most demanding" aspect; presence at extubation was not pleaded but is subsumed	Theory was not pled; district court lacked opportunity to involve the government before intervention decision	District court did not abuse discretion in refusing to consider the unpleaded extubation theory
Documentation/724 claims with unsigned emergence line on carbonless copies	Unsigned emergence lines on billing copies prove noncompliance with documentation rule	Regulation requires documentation in patient medical record (top copy); billing carbonless copy omission not dispositive	Relator failed to obtain top copies in medical records; insufficient evidence of knowing false claims; partial SJ denied

Key Cases Cited

Minn. Ass'n of Nurse Anesthetists v. Allina Health Sys. Corp., 276 F.3d 1032 (8th Cir.) (dispute over anesthesiologist presence during emergence created material fact issue)
United States ex rel. Ketroser v. Mayo Found., 729 F.3d 825 (8th Cir.) (reasonable interpretation of ambiguous regulation undermines FCA scienter)
United States ex rel. Purcell v. MWI Corp., 807 F.3d 281 (D.C. Cir.) (agency guidance can warn a regulated defendant away from reasonable interpretation; Safeco standard applied)
K & R Ltd. v. Mass. Hous. Fin. Agency, 530 F.3d 980 (D.C. Cir.) (failure to obtain prior agency approval does not itself establish recklessness)
Safeco Ins. Co. v. Burr, 551 U.S. 47 (Supreme Court) (defining reckless disregard in statutory contexts; guiding standard for scienter inquiry)